Jepson v. Bank of New York Mellon (In re Jepson)

Summarized by Daniel Waxman , KEWA Financial Inc.
9 years 11 months ago

Citation:

Jepson v. Bank of New York Mellon (In re Jepson), Case No. 14-2459 (7th Cir. Mar. 22, 2016)

Tag(s):

Ruling:

The Court of Appeals ruled that, under New York law, a debtor-homeowner, does not have standing to challenge the assignment of a note / mortgage based upon the lender's alleged failure to comply with the terms of a pooling and service agreement.

Procedural context:

Appeal from District Court for the Northern District of Illinois. Bankruptcy Court dismissed debtor-homeowner's complaint seeking to invalidate note / mortgage and modified stay to permit lender to continue foreclosure proceeding. District Court affirmed. The Court of Appeals affirmed, in part, on the basis set forth above, but remanded to the Bankruptcy Court to address two separate arguments raised, but not ruled upon, by either the Bankruptcy Court or the District Court.

Facts:

The Debtor, Jepson, executed a note in the amount of $336,000 secured by a mortgage on real property owned by the Debtor. The note was in the name of America's Wholesale Lender ("America") and the mortgage listed America as the lender and MERS as the nominee. The note was subsequently endorsed in blank by Countrywide Home Loans d/b/a America and transferred to a RMBS Trust, with BNY Mellon as named trustee. The RMBS Trust was created and governed by a Pooling Service Agreement ("PSA"). The Debtor defaulted on the Note and BNY Mellon initiated a foreclosure proceeding. The Debtor then filed a chapter 7 bankruptcy petition. BNY Mellon sought to modify the stay to complete the foreclosure and the Debtor filed an adversary proceeding seeking a declaratory judgment that BNY Mellon could not enforce the note because it was transferred in violation of the terms of the PSA. The Debtor also alleged that the note was void and non-negotiable because America was a fictitious entity and that BNY Mellon could not enforce the mortgage because they were an unlicensed debt collector under the Illinois Collection Agency Act.

Judge(s):

Posner, Ripple, and Hamilton

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